State-run Bangladesh Krishi Bank, or BKB, has once again sought Tk 20 billion in loan from the central bank's refinancing scheme to continue its farm lending, officials say.
The cash-strapped bank took out Tk 10 billion loans in September last year from Bangladesh Bank to close its funding gap.
"…we need the loan to continue agriculture credit disbursement and meet additional loan demand," BKB managing director Ali Hossain Prodhania wrote in a letter to the Finance Ministry.
In the letter, the bank's boss also sought state guarantee for the loans.
The bank approached the central bank seeking Tk 20 billion, which the regulator agreed to provide from its refinancing scheme.
However, the central bank asked the BKB to come with a guarantee from the government against the amount of loans.
Last month, the BKB requested the financial institutions division to facilitate the process of guarantee for the loan.
A senior official at the financial institutions division told the FE on Thursday the application with recommendations has already been sent to the finance division for its consideration.
The finance division provides guarantee on behalf of the government, he said.
In fiscal year 2018-19, the BKB disbursed Tk 61.33 billion as farm credit against its target of Tk 50 billion.
In the current fiscal, the bank set the target to distribute Tk 55 billion and until mid-February it could disburse Tk 39.36 billion, reaching the target of 72 per cent.
In the letter, the BKB managing director said there is a huge demand for agricultural credit in the field level this year and the bank fails to meet the needs from its own fund.
Since 2004, the bank has secured loans from the central bank scheme ten times, but never failed to repay, he wrote.
Mr Prodhania told the FE the specialised bank provides farm credit at an interest rate of between 4.0 per cent and 9.0 per cent, lower than its borrowing cost of nearly 9.69 per cent.
"That's why, the bank incurs losses every year," he said.
The bank needs to raise the size of balance sheet and increase the volume of lending, which will help lower operating costs, he said responding to a question how the bank could avoid making losses year after year.
Enhancing professional efficiency can also help in this case, he said, adding a set of restructuring programme has been taken up to make the bank profitable.
